GrubHub Stock Shorts Could Be Sweating Ahead of Earnings

GRUB shorts have been in covering mode, but plenty of bearish bets are still levied toward the stock

Managing Editor
Oct 24, 2017 at 12:05 PM
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Earnings season is hitting high gear, with a number of stocks already delivering earnings wins. Looking ahead, online restaurant delivery service GrubHub Inc (NYSE:GRUB) is slated to unveil its quarterly results before tomorrow's open. Here's a closer look at how GRUB stock has been performing ahead of earnings, and how traders both in and out of the options pits have been positioning themselves.

GrubHub stock is up 0.3% today to trade at $51.55, paring a portion of yesterday's 1.7% loss -- which came on news that Amazon's smartphone app will soon allow take-out orders. Despite the looming presence of FAANG rivals, GRUB stock has managed to add 37% year-to-date, and hit a record high of $57.61 as recently as Sept. 7.

Bigger gains could be on the horizon, too, should the equity's post-earnings history repeat itself. GRUB shares have moved higher the day after earnings in the last two quarters by an average of 15.9%. On average, the equity has swung 14.4% in the subsequent session, regardless of direction, following the last eight reporting periods. This time around, GrubHub stock is pricing in a slightly larger move of 14.6% -- and another move to the upside could vault GRUB stock to a new all-time high north of $59.

A short squeeze could also help fuel GRUB's charge. Short interest decreased by 13% during the last reporting period to 16.82 million shares. However, this still represents a whopping 28% of GRUB's total available float. It would take more than nine days for shorts to fully cover their positions, at the stock's average daily trading volume.

A number of options traders appear to be bracing for a post-earnings volatility crush, too. The stock's weekly 10/27 47-strike put has seen the biggest increase in open interest during the past two weeks, and Trade-Alert suggests most of these puts were sold to open. The last time GRUB traded below $47 was ahead of its early August earnings report.
 

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